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How GST will Impact on Your Car Insurance Premium?

Goods and Service Tax popularly referred to as GST is a merger of all indirect taxes such as sales tax, excise duty, service tax and other state taxes. It came into effect on 1st July 2017 and ensured that the final user pays a single tax. However, home appliances and lifestyle products have become more expensive since GST was implemented. Consumer goods and automobiles, on the other hand, have witnessed a price drop.

 

But what’s the impact of the GST on car insurance premium? Let us explain it in detail!

 

Impact of GST on Car Insurance Premium

 

Before GST, car insurance premium included service tax. Whereas now, the service tax is replaced with GST, hence it is important to understand how it has affected your car insurance premium amount.

 

Product Type

Applicable on

Service Tax + CESS before GST

Rate of Implementation post GST

Car insurance

Premium Payable

15%

18%

Rider insurance

Rider Premium Payable

15%

18%

 

The rate of GST charged on vehicles is different from that of life insurance policies. For example, GST levied on endowment plan is higher in the first year, and lower for subsequent premiums. However, the GST on car insurance premium is fixed, i.e. 18%. This means you are paying 3% higher tax on four-wheeler insurance premium ever since GST came into effect.

 

The policyholder is liable to bear the higher tax rate in the form of higher premium rates. Due to the increased rate of taxation, the insurance industry has taken a highly competitive turn. Every insurer is in the pursuit of offering attractive deals such as effective coverage, responsive and friendly customer service, discounts on online purchases, etc. At Chola MS, we have also banked on cashless garages, to ensure that you can get your car repaired without having to bear the finances.

 

Basically, GST has increased the premium amount by 3%, but due to the strict motor vehicle law, you cannot avoid buying the policy. Also, why break the law and drive an uninsured vehicle when you receive great offerings and customer service?

 

However, do not forget to do a thorough research before you purchase a car insurance policy. The GST on car insurance premium is high, but the benefits of being insured are higher!

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